The Securities and Exchange Board of India (Sebi) has sought an entire overhaul of the present regulations with regard to collective investment schemes, because it worries that loopholes within existing guidelines make it possible for for gullible investors taken for a ride.
A number of these businesses used these loopholes to mop up funds from gullible individuals. There are actually more than one lakh complaints with Sebi related to non-payment of dues by CIS. The regulator in addition has received several complaints against MLM firms, art funds and time sharing schemes which are not really within the regulatory authority.
“There are some informal MLMs operating openly, and also that are collecting deposits without the need of regulations. This is actually critical that they come placed under some regulatory ambit,” said Ashvin Parekh, national head, financial services, Ernst & Young.